Jazz Pharmaceuticals (JAZZ 0.74%) announced a $7.6 billion deal to acquire GW Pharmaceuticals (GWPH), a British biotech company focused on drugs derived from cannabis. The unexpected news sent shares of GW Pharmaceuticals soaring 46%.
Under the terms of the agreement, Jazz will pay $220 per American depositary share (ADS) in the form of $200 in cash and $20 in Jazz shares, a 50% premium to GW's closing price yesterday. The deal values the enterprise at $6.7 billion net of cash that GW carries on its balance sheet and is expected to close in the second quarter of 2021.
The transaction will bring together two profitable and growing biotech companies with complementary businesses. GW Pharmaceuticals' lead product is Epidiolex, a drug for treatment of early-onset seizure disorders that was the first plant-derived cannabinoid medicine ever approved by the U.S. Food and Drug Administration. Sales of the potential blockbuster, a purified form of cannabidiol (CBD), grew 72% in 2020 to $510 million. The company also has a drug in phase 3 trials for spasticity caused by multiple sclerosis and spinal cord injury, and other cannabinoid drugs in mid-phase trials for schizophrenia and autism spectrum disorders.
Jazz has a portfolio of drugs focused on cancer and sleep disorders, with revenue that grew 12% in the most recent quarter. The acquisition of GW expands its neuroscience business and its pipeline from 10 to 19 clinical programs. Jazz believes the deal will accelerate revenue growth and add to earnings per share in the first year.
Shares of Jazz initially fell on the announcement but mostly recovered by mid-day as investors apparently came to appreciate the strengths of the combined company.